Stu’s take on where rates are heading
Last night on ABC’s 7.30, CBA CEO Matt Comyn said CBA economists expect one more RBA rate rise in May before the cycle levels out. This agrees with what we can see on the ASX 30-Day Cash Rate Futures, which suggest one further increase between May and September.
The cash rate is currently 3.85% and, if forecasts are correct, could rise to around 4.10% mid-year.
A cash rate rise simply means the RBA is “tapping the brakes” to slow spending and ease inflation. Inflation is currently 3.8%, while the RBA aims to keep it within a 2%–3% target range, which is considered a healthy rate for the economy.
Looking back over the past 36 years (since its introduction in 1990), the average cash rate has been approximately 3.86% - 4.00%. This includes the peak of 17.50% in January 1990 and the record low of 0.10% in November 2020 during COVID.
Unless another black swan event like a pandemic or global war, occurs, this year's cash rate is essentially within the long-term average, and we need to become familiar with it once again.
The cash rate is the interest rate banks charge each other for overnight loans. Your variable home loan rate is the rate your lender charges you, and banks make their margin on the difference. Importantly, your lender, not the RBA, controls your variable rate.
So how can you maintain the most competitive variable home loan rate?
Regular rate reviews: We recommend reviewing your interest rate every 6–12 months to keep lenders accountable. We already do this for you, but if you’d like an out-of-cycle review, just ask me.
Maintain a strong credit profile: A clean repayment history across all debts supports a stronger credit score, meaning lenders will see no red flags when you apply for loans. If you’d like to check yours, we can arrange a report. Just ask me
Know your LVR: Your Loan-to-Value Ratio (LVR) and loan size influence available discounts. If you’re unsure of your LVR, we can arrange a review and an updated property valuation. Just ask me
From your insurances, utilities, groceries, vehicles, petrol and home loan repayments we all have these regular expenses that you need to manage. If your home loan repayment feels off or is bothering you, please reach out. We're here to help.